Health care before Medicare

Retire before 65 and you must bridge the gap yourself. Every coverage option compared — COBRA, ACA, spouse's plan, Medicaid — and the 2026 income rules that decide the cost.

The most overlooked obstacle to early retirement is not money — it is health insurance. Medicare generally starts at age 65, so retiring before then leaves a gap you have to bridge yourself. This spoke sits under the Retirement hub.

Retire at 60 and that is five years with no employer plan and no Medicare. Going uninsured is not a plan: one serious illness can undo a retirement that took thirty years to build. So the bridge is not a detail to sort out later. It is part of choosing a retirement age.

Every option, compared

Health care sharing ministries: read this before you join one

They advertise low monthly costs and they are not insurance. The National Association of Insurance Commissioners is blunt about it: sharing ministries are not regulated by state insurance departments, do not have to cover pre-existing conditions or cap your out-of-pocket costs, and are not legally required to pay your claims. There is no state guaranty fund behind them. Some members are reimbursed reliably for years. Some are not, and discover it during a cancer diagnosis. If the low premium is tempting because you are just over the subsidy cliff, fix the income problem instead — the levers below are cheaper than the risk.

COBRA vs an ACA plan

This comparison is worth doing properly, because the intuition — "COBRA keeps my good employer plan, so it must be the safe choice" — quietly ignores that you are now paying for all of it.

Two practical notes. You generally have 60 days to elect COBRA, and losing job-based coverage opens a special enrollment period on the marketplace — so you can price both before committing. And COBRA is retroactive to the day your coverage ended, which means some people deliberately let the 60-day clock run while uninsured, ready to elect COBRA if something catastrophic happens. That is a real strategy with a real risk, and it only works if you can pay the back premiums.

The other thing to know: COBRA cannot span the gap. Retire at 60 and 18 months of COBRA runs out at 61 and a half. You will be shopping the marketplace anyway. The only question is whether you do it now or in a year and a half.

What changed for 2026

The enhanced premium tax credits — the temporary ARPA and Inflation Reduction Act rules that made marketplace coverage much cheaper — expired on December 31, 2025. Two specific things reverted, and the difference between them is the thing most articles get wrong.

What went away: the 8.5%-of-income ceiling, and eligibility for any credit at all above 400% of FPL. Above that line your premium tax credit is now zero.

What did not go away: the cap itself. If your household is between 100% and 400% of FPL, the cost of the benchmark silver plan is still capped at a set share of your income. The cap did not disappear. It got narrower and harsher. Here is the actual table the IRS published for 2026:

Source: IRS Rev. Proc. 2025-25.

This matters enormously. A 62-year-old at 250% of FPL who is told "the cap is gone" concludes there is no help available and may not enrol at all. There is help: their benchmark premium is capped at roughly 8.44%–9.96% of income. It is worse than it was under the enhanced credits — under those rules the same household paid a good deal less — but it is not nothing, and walking away from it is the single most expensive mistake available here.

Under the enhanced rules, nobody paid more than 8.5% of income and there was no cliff. Under the reverted rules, the top band pays 9.96% and the cliff is back.

The cliff, briefly

One dollar of MAGI above 400% of FPL and your premium tax credit is zero. Not tapered. Zero.

For a single 60-year-old that line is $62,600. Sitting exactly on it, the benchmark silver plan costs them $6,235 for the year. One dollar over, and they owe the whole $15,914 — a credit of about $9,679 destroyed by a single dollar of income.

This deserves its own page, because the arithmetic gets genuinely absurd and there is a repayment rule for 2026 that almost nobody has caught up with. Read: the 2026 ACA subsidy cliff, in dollars.

The floor nobody mentions

Here is the trap that the cliff creates. Told to get their income down, people push it down too far.

Below 100% of FPL you generally get no marketplace premium tax credit at all. The credit exists for households between 100% and 400% of FPL — there is a floor as well as a ceiling.

In the 40 states (plus DC) that expanded Medicaid, this is usually survivable: below 138% of FPL you qualify for Medicaid instead, which is real coverage with no premium. But in the ten states that never expanded Medicaid, an adult below 100% of FPL can be too poor for a marketplace subsidy and too well-off for Medicaid, and therefore eligible for nothing. That is the coverage gap, and KFF counts roughly 1.4 million people in it.

An early retiree living off a large taxable brokerage account can land here by accident. Spend from principal and Roth accounts, realise no gains, and your MAGI can be near zero while your spending is $70,000 a year. You are not poor. You are just invisible to the formula — and in a non-expansion state, uninsured.

The target is not "as low as possible". It is between the floor and the cliff, and if you are aiming for a silver plan, ideally between 100% and 250% of FPL where cost-sharing reductions also cut your deductible.

The poverty line, by household size

Plan-year 2026 eligibility is measured against the 2025 HHS guidelines (48 states + DC; Alaska and Hawaii are higher). One person: $15,650, plus $5,500 for each additional person.

Household size here is your tax family — you, your spouse if filing jointly, and your dependents. A couple bridging to Medicare together has a cliff at $84,600, not $62,600, which is why the arithmetic changes sharply the year one spouse turns 65 and drops off the marketplace plan.

The income that counts is not the income you think

ACA help is not based on taxable income. It is based on ACA MAGI: your adjusted gross income, plus three add-backs (IRC §36B).

Counts:

• Traditional 401(k) and IRA withdrawals
• Roth conversions — the full converted amount
• Capital gains, dividends, interest
• Pensions and annuity income
• Wages and self-employment income
• All of your Social Security benefits — including the portion that is not taxable. This one surprises people. The untaxed part of your benefit is invisible on your tax return and fully visible to the ACA formula.
• Tax-exempt interest — municipal bonds do not hide here either
• Excluded foreign earned income

Does not count:

• Withdrawals from a Roth account you already own
• Return of your own principal or basis from a taxable brokerage account (only the gain counts)
• Loan proceeds, including a HELOC or a margin loan
• Gifts and inheritances
• The proceeds of selling your home, up to the excluded gain

That last group is the whole game. Two retirees can spend exactly $70,000 a year and have completely different ACA MAGI, purely because of which accounts they spend from.

The levers that move MAGI

Roughly in the order most people should reach for them:

1. Spend from Roth and from basis. Free. No tax, no MAGI. This is the reason a Roth balance is worth more between 60 and 65 than at almost any other time — see Roth vs Traditional.
2. Pre-tax 401(k) or traditional IRA contributions, if you still have earned income. Deductible contributions come straight off AGI. A part-time job can fund a deductible IRA and lower your MAGI at the same time.
3. HSA contributions. An above-the-line deduction, so it reduces MAGI dollar for dollar. From January 1, 2026, bronze and catastrophic exchange plans count as HSA-qualified regardless of the general high-deductible test (IRS Notice 2026-05), which widens this lever considerably for early retirees. Note you cannot contribute once you enrol in Medicare.
4. SEP-IRA or solo 401(k), if any of your income is self-employment. The contribution limits are far larger than an IRA's, and self-employed health insurance premiums may also be deductible above the line.
5. Manage capital gains deliberately. You choose when to realise them. Harvest losses to offset gains; up to $3,000 of net capital loss can offset ordinary income each year, and the rest carries forward. Specific-lot identification lets you sell high-basis shares and realise less gain per dollar raised.
6. Time the lumpy events. A Roth conversion, a business sale, an exercised option, a big rebalance — each is a choice about which year the income lands in. Between 60 and 65 that choice is worth real money.

The tax-efficient move and the ACA-efficient move often point in opposite directions. A Roth conversion at 61 that looks smart on a pure tax spreadsheet can cost you five figures in lost premium credits and — separately — raise your Medicare premium two years later through IRMAA, because IRMAA looks back 2 years. A conversion at 63 lands on your premium at 65.

Planning the bridge

Model it before you act, not after.

• ACA bridge tool — where your income lands against the cliff, and the headroom you have left.
• Roth vs Traditional — what a conversion really costs once the cliff and IRMAA are priced in, not just the income tax.
• Retirement Checkup — the whole picture.

And build the premium into the plan itself. Health care is the line item that inflates fastest in a retirement budget, and pre-65 premiums are the most expensive stretch of it — see inflation and retirement.

Key takeaways

• Medicare starts at 65. Retire earlier and the bridge is yours to build — COBRA cannot span it, and the marketplace usually can.
• The premium cap did not disappear for 2026. Between 100% and 400% of FPL, your benchmark silver premium is still capped, at 2.10% to 9.96% of income. What expired was the softer enhanced cap and eligibility above the cliff.
• Above 400% of FPL the credit is zero — $62,600 for one person, $84,600 for two.
• There is a floor too. Below 100% of FPL you generally get no credit, and in the ten non-expansion states you may get nothing at all. Do not crush your MAGI past it.
• The number that decides all of this is ACA MAGI, which includes every Roth conversion and all of your Social Security — but not Roth withdrawals or return of basis.

The enhanced credits expired 2025-12-31 and legislation to restore them was live in Congress when this was written; the House passed a three-year extension in January 2026 and the Senate had not acted. A change could be retroactive. We re-check this page against current law at every update. Last verified 2026-07-11.

Educational only — not financial, tax, or medical advice.